Ray Dalio: 2011 Is A Sweet Spot, 2012 Much Harder (GLD, GG, ABX, GDX)

Ray Dalio, of Bridgewater Associates is on CNBC this morning.

Ths is noteworthy for two reasons.  Dalio rarely gives TV interviews, and Bridgewater Associates is one of the biggest hedge funds in the world.

Dalio says that Bridgewater is a group of independent thinkers, and is proud of its radically transparent culture.  It's because of that openess, Dalio says, that the hedge fund knows what's going on.

Dalio was asked about the U.S. dollar's role as the reserve currency.  He says that the dollar will inevitably decline from being the world's reserve currency to one of a few reserve currencies.

U.S. equities are comparitively cheap, and  the flows are beneficial to them. Dalio thinks that we will have a "pretty good" environment for equities, but cautioned that it's importnat to be diversified, and investors need some gold in their portfolio, and to diversify away from dollar-denominated equities.   Dalio said that gold should be a part of people's portfolios.  Investors can play this by owning SPDR GLD ETF GLD, or a number of gold miners, like Barrick Gold ABX, Goldcorp GG, Gold Miners ETF GDX.   Gold is the greatest store of wealth, when compared to currencies.

Dalio says that purchases of financial asets by the central banks helped put money back into the economy, but it's undesirable in the long term.  We needed that spending in the short-term however to make up for the lack of private sector spending.

Dalio believes that private credit growth will slow and economic growth will slow as well.  He thinks we will average around 2% real economic growth.  The deleveraging will be with us for a long time.  If you can print money, you're okay.  That's why countries who can't print money, like Portugal and Spain, are in trouble.

2011 is a sweet spot in the cycyle, whereas 2009 and 2010 were years for asset purchases.  Dalio believes we will have longer term slower growth.

Dalio believes the next seismic shift, sometime in 2012, is the currency links.  It's a one way street for investors because of the currency links.  Dalio says that many countries have an inappropriate monetary policy.  He believes in 2012, many emerging market economies will have to devalue their currencies as a result of this.

2012 is going to be a difficult year because of the need to revalue the currencies.  We're competing with emerging market economy currencies, commodities, but Dalio thinks that 2011 will be a good year for equities by and large.  He does believe that towards the latter part of 2012, we will see a global tightening.

Dalio says that many emerging market economies will not be able to slow inflation, like China, and the U.S. will have to remain with easy monetary policy to combat this. 

Dalio concluded the interview by saying he's not interested in holding municipal bonds, although he admitted that he wasn't a muni expert.